Group Practice Profitability: Why Most Counseling Practices Struggle and How to Fix Them
- Jordanthecounselor
- Jun 7
- 8 min read
Updated: Oct 16
By Jordan Harris and Paul Peterson
Here’s the main chart.
If you have a small, successful group practice, you can expect to make just over $3,904 per year.
That’s not a typo.
When we looked at the numbers, we were shocked, and we (Jordan in particular) couldn’t stop talking about it.
This was then confirmed by various group practice owners on social media. Many of whom left comments like this:
This will come as a shock to many clinicians. How is it that group practices don’t make very much money?
The answer reveals an uncomfortable truth about the business side of counseling.
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The High Revenue, High Cost Reality
First, let’s clear something up. Group practices are often high-revenue businesses, meaning they generate a lot of cash. However, they also have very high maintenance costs. This means owners keep less cash than you’d think.
For instance, in our example, we estimated a small group practice would generate $723,114 a year in revenue.
That sounds like a LOT of money. But let’s say you have a generous 70/30 split (where clinicians receive 70%). That means you’re instantly losing 70% of the revenue. This leaves you with $216,934.20 to pay all of your expenses.
These expenses include your rent, EHR, website, insurance liability, transaction fees, accountant, phones, Wi-Fi, business fees, tissues, snacks, clinical directors, leadership, billing and admin staff, legal fees, onboarding of new employees, and trainings.
Oh, and taxes. Don’t forget taxes.
The expenses are so high that often group practice owners make most of their actual profit from seeing clients themselves.
Which is…discouraging. If you make most of your profit from seeing clients, you might as well just see clients and stop running the group practice!
So there’s a huge disconnect between what clinicians think an owner makes and what practice owners actually make. Clinicians might run some quick math, see the $700k revenue number, and think, “Wow, the owners are making a ton of money, and I’m doing all the work.”
Meanwhile, group practice owners are looking at all the expenses and thinking, “Wow, the therapists are making a ton of money, and I’m paying all their expenses.”
This is why there’s a misunderstanding between practice owners and clinicians, but this is not why group practices struggle to make a profit.
The Retention Factor: Why Clinicians Being Full Matters Most for Group Practice Profitability
Group practices struggle to make a profit because many therapists have poor client retention. A recent study by Janse and colleagues’ entitled Disentangling the therapist effect: Clustering therapists by using different treatment outcomes stated that about 25% of therapist in their study were ineffective and had poor retention. Another 40% were effective with some clients, but had high dropout rates for the rest.
This means that for various reasons between 25%-65% of therapists struggle with retention.
In our case study, a group practice’s profit grows from $3,904 to $32,652 per year, primarily by having clinicians increase their average weekly sessions from 20 to 22.5 (for 46 work weeks a year). A group practice owner’s profit moves from $3,904 a year to $71,467 a year by having clinicians increase their average weekly sessions from 20 to 25 (in a 46-week year).
This means the biggest factor in running a profitable practice is ensuring your clinicians have full caseloads.
Of course, part of this depends on your marketing. If 100 potential new clients call your phone daily, you can pretty easily fill a practice.
However, most of the time, the biggest problem isn’t poor marketing but the fact that you have counselors who aren’t keeping clients. These clinicians are like leaky buckets: you try to fill them with clients, but they lose them so fast that it’s nearly impossible to get them full. This means they are consistently seeing fewer than 25 clients a week, which means your profits are low. The exact number of sessions needed per clinician varies. In our models, we assume a clinician needs to retain a client for 10-15 sessions on average. You can download our free calculator here and run your own numbers.
To be transparent, in our above examples, the "successful" group practice has clinicians seeing 20 clients a week and charges $110 per hour. The "amazing" group practice has clinicians seeing 22.5 clients a week and charges $120. The "perfect" group practice charges $135 per hour and has clinicians seeing 25 clients per week. So, the more lucrative practices also have a higher hourly rate.
This may seem unfair. After all, why is the "perfect" group practice charging more? Doesn’t that skew the numbers?
No.
Since the "perfect" group practice isn’t as worried about retention, they don’t have to lower their rates to attract or keep clients.
What typically happens is that a group practice struggles to get their clinicians' caseloads full. Consequently, they lower their rates by accepting lower-paying insurance plans and EAPs. They feel they have to do this to keep clinicians full. It’s ironic that in an attempt to make more money, these struggling practices use a strategy that keeps them in low-profit patterns.
They’re not solving the retention problem, which lowers the group practice owner's revenue.
In the end, it’s the practice with better client retention that can confidently say, “No, we don’t accept low reimbursement plans,” and subsequently make more money.
Addressing Low-Retention Therapists to Boost Group Practice Profitability
So, what do you do?
Unfortunately, you may have to consider letting low-retention therapists go.
In an ideal world, you’d provide them with more training, they’d improve, and you’d have a more efficient clinician. However, training these clinicians effectively is very challenging. The research shows that sending a clinician to a typical CE training is unlikely to help them improve their client retention skills {1}.
The reason seems to be that these CE trainings often focus on the wrong things for lengthening retention. They offer interventions geared towards resolving complex problems like clients’ traumas or attachment needs, but that’s not necessarily where low retention therapists are making mistakes.
Instead, these therapists are often making mistakes in smaller, more fundamental skills. They might be mishandling client ambivalence, not setting goals cooperatively, or struggling to build a strong therapeutic alliance. Research often refers to these as “interpersonal skills.”
At the Private Practice Incubator, where Paul and I (Jordan) coach clinicians, we do train these skills. We have specialized training in process coding and use several assessments that test for these specific skills. We then use deliberate practice, the gold standard in therapist education, to teach clinicians these skills {2}. You can take our mini-assessment of your skills here. If you’d like, reach out (Jordanthecounselor[at]gmail.com), and we’ll schedule a time for you or your practice to go through our full assessment. It’s free.
If you don't have specialized training in deliberate practice or process coding we wouldn’t recommend training your own therapists in interpersonal skills. This is why we believe that for many group practice owners, the most practical, albeit difficult, option is to part ways with low-retention clinicians {3}.
You could implement productivity incentives, but we believe this too often puts undue pressure on clinicians. These incentives can subtly shift clinicians from intrinsic to extrinsic motivation, which can actually harm productivity in the long run.
Some will say that this whole article is about having productivity metrics. That’s a fair critique. What we’re against is not so much productivity expectations themselves, but the coercive incentives that often accompany them. Our preference is to operate in a coercive-free manner. Tell your clinicians, “Hey, to make this business work, we ask everyone to aim for seeing around 25 clients a week,” and leave it at that. No carrots, no sticks.
Focus on Retention Before Ramping Up Marketing
With all of this being said, the most important thing is for you to run your own numbers. The only way to truly know if this applies to your business is to look at your own data.
One final thing, please don’t do what many group practice owners do: focusing primarily on marketing when retention is the core issue. Some try to solve this by paying an ad agency to run their ads. We’re not against ads, but if you have a retention problem, fix that first. Then run ads. Otherwise, you’re spending a lot of money to fill a leaky bucket.
Others focus on marketing by getting some sort of certification (CARF, etc) so they can accept Medicaid or serve other specific populations. This is also a mistake. First, these site certifications often cost a ton of money, and the reimbursement from these payers is frequently low. You end up spending a lot of money to make a little. Second, if you have clinicians who can’t retain clients, they aren’t going to be able to bill much with those payer sources anyway.
If you want to fill a leaky bucket, first plug the leak.
The Path to Profitability is Paved with Good Retention
So, that’s the big idea:
Group practice owners often make very little profit. Clinicians see group practice revenue, not expenses.
Group practices lose money because some clinicians have poor client retention.
CE trainings often won’t help because they train the wrong skills. Private Practice Incubator (PPI) has specialty training to address these skills.
Most group practices try to solve the retention problem by getting more clients (marketing). This usually doesn’t work if retention is the underlying issue.
All this being said, let’s be very honest. The idea of firing a counselor is heartbreaking. The idea of firing multiple? Well, for many group practice owners, that’s unthinkable.
Something about it just feels wrong. Let’s honor how hard even the idea of that is.
Really, this is about making an informed choice. Some group practice owners are very much okay taking home less money if it means keeping their team intact. The most important thing is that you make an informed choice about your business.
Best,
Jordan + Paul
Notes
{1} For an excellent overview of this research check out Better Results by Miller, Hubble and Chow.
{2} A few references:
Anderson, T., & Strupp, H. H. (2014). Training in time-limited dynamic psychotherapy: A systematic comparison of pre- and post-training cases treated by one therapist. Psychotherapy Research, 25(5), 595–611. https://doi.org/10.1080/10503307.2014.935517
Janse P, Geurtzen N, Scappini A, Hutschemaekers G. Disentangling the Therapist Effect: Clustering Therapists by Using Different Treatment Outcomes. Adm Policy Ment Health. 2024 Sep;51(5):769-779. doi: 10.1007/s10488-024-01365-3. Epub 2024 Mar 21. PMID: 38512559; PMCID: PMC11379780.
Edmondstone, C., Pascual-Leone, A., Soucie, K., & Kramer, U. (2023). Therapist effects on outcome: Meaningful differences exist early in training. Training and Education in Professional Psychology, 17(2), 149–157. https://doi.org/10.1037/tep0000402
{3} After showing this article to a friend in the Group Practice space, she pointed out that low retention clinicians also hurt your brand as a practice, which ultimately makes practice building more difficult.
Paul Peterson and Jordan Harris are co-founders of Private Practice Incubator, a consulting firm dedicated to:
Helping clinicians earn more money.
Helping clinicians help more clients.
If you'd like to learn more about launching your practice, visit us here.
Jordan Harris
Jordan Harris, Ph.D., LMFT-S, LPC-S, received his Doctor of Philosophy in Marriage and Family Therapy from the University of Louisiana Monroe. He is a licensed professional counselor and a licensed marriage and family therapist in the state of Arkansas, USA. In his clinical work, he enjoys working with couples. He also runs a blog on deliberate practice for therapists and counselors at Jordanthecounselor.com
Paul Peterson
Paul Peterson is a Licensed Professional Counselor (LPC) and Licensed Marriage and Family Therapist (LMFT) in the state of Arkansas. He has certification and/or training in EFT, hypnotherapy, and mindfulness as well as adult psychological development models. He's been in the mental health field since 2015 and in 2019 worked with a team of authors to publish a content analysis in the Journal of Marital and Family Therapy. The content analysis reviewed almost 1,000 research articles and tracked trends in publishing and clinical effectiveness research. He has also published a book on a Wholeness-oriented approach to contemporary Christian faith. He gives regular training on clinical skills, hypnotherapy, and business skills for solo practice therapists.
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